Transcript School Finance

Seminar on School Finance Property Taxes and the Tax Levy
(and other Local Revenues)
Steve Miller CPA
Senior Financial Advisor
PMA Financial Network, Inc.
Warrenville, IL
630-393-9494 x6413
[email protected]
Introduction & Personal
Objectives for Workshop
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Please state your
name,
Where you work, what
you do there and
What you hope to
learn from this
workshop.
This Morning’s Objectives
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Understand the Local
Sources of Revenues
Understand the
Property Tax Cycle
Understand the State
Sources of Revenues
Understand the
Federal Sources of
Revenues
Local Revenues - Objectives
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Recognize school funding as a political process.
Recognize our “over” dependence on property
taxes.
Become familiar with the property tax levy and
extension cycles.
Be cognizant of the time frame for each process.
Start looking for alternate revenue sources.
Revenue by Source
State-wide
Other State
12%
General State Aid
18%
Federal
8%
Property Taxes
57%
Other Local
5%
Local Revenues
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Investment Earnings
Student Fees
Impact/Transition Fees
Corporate Personal
Property Replacement
Taxes (CPPRT)
Local Property Taxes
Other Local Revenues
Investments
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If you have fund
balances, do a multiyear cash flow
analysis
Maximize interest
earnings by investing
funds for the longest
term based upon the
cash flow analysis
Student Fees
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Textbooks
Classroom Supplies
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Drivers Education ($50)
 Waivers
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Technology
Athletic Participation
Student Activities
Parking Permits
Etc. Any other ideas?
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Impact Fees
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From new housing
developments
Work with villages and/or
county to establish
consistent impact fees
Make sure the
villages/county distribute
the funds timely
To be used for
construction needs
Transition Fees
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From new housing
developments
Work with villages and/or
county to establish
consistent impact fees
Make sure the
villages/county distribute
the funds timely
To be used to bridge the
timing gap between
students and revenue
(GSA and property taxes)
Corporate Personal Property Replacement Taxes
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State tax on net income of
corporations to replace
local tax on the assessed
value of corporate personal
property (1979)
Jan, Mar, Apr, May, Jul,
Aug, Oct, Dec payments
Will fluctuate (+/-) with
the economy
http://tax.illinois.gov/LocalGovernment/
Property Assessment Cycles
Property Tax Cycles
Budget Cycle
2006
2007
2008
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
Assessment Cycle
2006
2008
2007
Township Assesses Properties
2008
2007
2006
County Assessor Review
2007
2006
Department of Revenue Equalizes
Tax Levy/Extension/Collection
2006
2008
2007
Tax Levy
Extension
Collection and Distribution
2005
Budget Cycle
Prepare Budget
Adopt Budget
2007
2006
2006-07
2007-08
FY07
2008-09
FY09
FY08
2006-07
FY09
2007-08
Manage Budget
Audit
FY07
FY08
Local Property Taxes
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Assessment Process
Review Process
Equalization Process
Levy Process
Truth in Taxation
Tax Extension
Property Tax Extension Limitation Law (PTELL)
Collection and Distribution
Referendums
Assessment Appeals & Other Issues
Assessment Process
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At the Township level, assessors identify real
property, appraise and place value on it. You should
double check that properties are on the books. Know
your assessor(s).
Market value determined by Real Estate Transfer
Declaration (Green sheet) for similar properties.
Business/Industrial properties are valued based upon
market value as well as income generated.
Illinois statute states assessed value should represent
33.3% of market value except for farm land.
Farmland is assessed using a yield-based formula.
A few counties have special classification systems.
Manage your real properties – new growth, TIFs
Cook County Classification System
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Vacant Land
Residential
Apartments
Not-for-Profit
Commercial
Industrial
22%
16%
24%
30%
38%
36%
Actual - 11.72%
Actual - 10.13%
Actual - 18.96%
Actual - 24.59%
Actual - 25.29%
Cook County Classification System
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2004 - SB2112 (“Houlihan Bill”)
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Increased Homeowner ($5,000) and Senior Citizen ($3,500)
Exemptions State-wide
Effective for tax year 2003, imposed a 7% cap on residential
reassessment increases in Cook County (other counties could
(but haven’t) adopted the cap)
7% cap expires after 2005 tax year unless extended by
legislation
2006
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Reduction of apartment assessment rate from 33% to 20%
over four years
Attempts to extended 7% Cap
Review Process
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Purpose - For system to correct
under, over, and non-uniform
assessments by local assessor.
Assessor sends changes to
property owners. Publishes.
Property owners can go to the
assessor and then the Board of
Review to challenge their
assessment.
Next level of challenge - Property
Tax Appeals Board (PTAB) or
Circuit Court
Equalization Process
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Purpose - To bring all township
assessments to the state mandate of
33.3%.
Multiplier is applied to township and
then county assessments (except
Cook).
Cook County multiplier is determined
by the Illinois Department of
Revenue.
EAV = Multiplier x Assessed value
Cook County Warning – Your EAV
may go down the year of Chicago’s
reassessment.
Cook County
Multipliers
2005 2.7320
2004 2.5757
2003 2.4598
2002 2.4689
Levy Process
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School district passes budget
Determine levy amount. How much do you
ask for? Are you under the Tax Cap?
If required:
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Publish in Newspaper
Hold public hearing
Board adopts Levy
File Certificate of Tax Levy with County
Clerk prior to Dec. 31st. Double-check the
bond amounts (County clerk offices can
make mistakes!)
File Abatements, Certificate of Compliance,
PTELL resolutions if required
ILLINOIS STATE BOARD OF EDUCATION
Original:
Amended:
School Business and Support Services Division
100 North First Street
X
Springfield, Illinois 62777-0001
217/785-8779
CERTIFICATE OF TAX LEVY
A copy of this Certificate of Tax Levy shall be filed with the County Clerk of each county in which the school district is located
on or before the last Tuesday of December.
District Name
District Number
Lincoln-Way Community High School
210
County
Will
Amount of Levy
Educational
$
Operations & Maintenance
$
Transportation
$
Working Cash
$
Municipal Retirem ent
$
Social Security
$
31,202,568
5,269,975
2,706,367
803,037
786,700
786,700
Fire Prevention & Safety * $
Tort Im m unity
$
Special Education
$
Leasing
$
Other
$
Other
$
Total Levy
$
1,017,546
434,356
43,007,249
* Includes Fire P reventio n, Safety, Energy Co nservatio n, Disabled A ccessibility, Scho o l Security,
See explanation on reverse side.
No te:
and Specified Repair P urpo ses.
A ny district pro po sing to ado pt a levy must co mply with
the pro visio ns set fo rth in the Truth in Taxatio n Law.
We hereby certify that we require:
the sum of
31,202,568
the sum of
5,269,975
the sum of
2,706,367
the sum of
803,037
the sum of
786,700
the sum of
786,700
the sum of
0
dollars to be levied as a special tax for educational purposes; and
dollars to be levied as a special tax for operations and maintenance purposes; and
dollars to be levied as a special tax for transportation purposes; and
dollars to be levied as a special tax for a working cash fund; and
dollars to be levied as a special tax for municipal retirement purposes; and
dollars to be levied as a special tax for social security purposes; and
dollars to be levied as a special tax for fire prevention, safety, energy conservation,
disabled accessibility, school security and specified repair purposes; and
the sum of
1,017,546
dollars to be levied as a special tax for tort immunity purposes; and
the sum of
434,356
dollars to be levied as a special tax for special education purposes; and
the sum of
0 dollars to be levied as a special tax for leasing of educational facilities
or computer technology or both, and temporary relocation expense purposes; and
the sum of
0 dollars to be levied as a special tax for
; and
the sum of
0 dollars to be levied as a special tax for
on the taxable property of our school district for the year
2005
.
Signed this
8th
day ofDecember
20
05
.
(President)
(Clerk or Secretary of the School Board of Said School District)
When any scho o l is autho rized to issue bo nds, the scho o l bo ard shall file a certified co py o f the reso lutio n in the o ffice o f the co unty clerk o f each co unty in which the district is
situated to pro vide fo r the issuance o f the bo nds and to levy a tax to pay fo r them. The co unty clerk shall extend the tax fo r bo nds and interest as set fo rth in the certified co py
o f the reso lutio n, each year during the life o f the bo nd issue. Therefo re to avo id a po ssible duplicatio n o f tax levies, the scho o l bo ard sho uld no t include a levy fo r bo nds and
interest in the district's annual tax levy.
5
Number of bond issues of said school district that have not been paid in full
.
(Detach and Return to School District)
This is to certify that the Certificate of Tax Levy for School District No.
,
Illinois, on the equalized assesed value of all taxable property of said school district for the year
County,
2005
,
Truth in Taxation
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Effective January 1, 2003 Cook County has same
requirements as other counties.
If current year’s levy request (excluding bond and
interest) is more than 5% greater than prior year’s
extension:
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A notice must be published in a newspaper
A public hearing must be held
The determination of the applicability is usually
established through the adoption of a tentative levy
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Determination can be no less than 20 days before the adoption
of the levy ordinance.
Truth in Taxation
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If Truth in Taxation notice is required
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Publication must be no more than 14 and no less than 7 days
before the date of the public hearing
Same rules apply as for other notices regarding “newspaper of
general circulation” etc.
Public Hearing
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District explains the reasons for the levy and any increases
District must permit anyone wishing to speak the opportunity
Can be part of a regular Board of Education meeting (no
longer first Tuesday in December)
Tax Extension
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Adds loss amount to District
levy
Calculate Property Tax
Extension Limitation
Calculate final tax rates for each
taxing district
Extend taxes on Equalized
Assessed Value and enters in
county Collector’s books
Deliver Collector’s books to
county Treasurer for preparation
of bills
Property Tax Extension Limitation Law
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Enacted in Collar Counties in 1991, Cook County in
1995, and by referendum in some downstate counties.
Limits the increases in property tax extension to 5% or
the increase in the “Consumer Price Index-All Urban
Consumers” (CPI-U), whichever is less.
Allows for issuance of limited tax bonds where bond debt
cannot exceed 1994 tax levy for bond debt. Enacted in
1995.
1996 Amendments. PTELL enacted for remaining Illinois
counties if approved at county-wide referendum. If law is
approved in referendum, then it becomes effective in the
next levy year.
Tax Capped Counties
http://www.isbe.net/sfms/FAAS01/taxcaps.htm
Property Tax Extension Limitation Calculations
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Limiting rate = (Aggregate Extension Base x (1+ CPI)) /
(Equalized Assessed Valuation - New Property)
Aggregate Extension Base - Prior year extension for all funds
excluding the debt service fund. (i.e.: for 2006 tax year, 2005
total tax levy extended less tax extended for debt service)
CPI - All Urban Consumer Price Index for December 31st.
CPI for December 2006 – 2.5%
New Property - New improvements or additions to existing
improvements on any parcel of real property that increased
the assessed value of that real property.
Debt Service Extension Base: The tax levy for debt service
levied in tax year when the Law is enacted.
CPI History
Ten Year CPI History
5.0%
Percent
4.0%
3.4%
3.4%
2.7%
3.0%
2.0%
3.3%
2.5%
2.4%
1.7%
1.0%
1.9%
1.6%
1.6%
0.0%
1997
1998
1999
2000
2001
2002
Calendar Year
2003
2004
2005
2006
Assumptions and Givens
Description
Amount
2005 Equalized Assessed Valuation
155,000,000
Estimated Current Year EAV
2006 Assumption ( A 9.68% Increase from 2004 )
Estimated New Growth
2006 Assumption
December 2005 Actual CPI
Given
170,000,000
6,500,000
3.40%
2005 Levy & Tax Rate / 2006 Proposed Levy
2005
2005
2005
Maximum
Proposed 2006
Fund
Levy
Extension
Rates
Rates
Levy
Education
4,025,000
3,500,000
2.2581
Tort Immunity
74,750
65,000
0.0419
Special Education
34,500
30,000
0.0194
0.0200
36,000
Operations & Maintenance
345,000
300,000
0.1935
0.2500
360,000
Transportation
172,500
150,000
0.0968
0.1200
180,000
IMRF
52,900
46,000
0.0297
55,200
Social Security
52,900
46,000
0.0297
55,200
Working Cash
86,250
75,000
0.0484
-
-
-
Life Safety
Aggregate Extension
2.5000
4,200,000
78,000
0.0500
90,000
-
4,843,800
4,212,000
2.7175
5,054,400
Bond & Interest
650,000
650,000
0.4194
656,000
Total Extension
5,493,800
4,862,000
3.1369
5,710,400
Limiting Tax Rate Calculations
A. Prior Year Aggregate Extension
B. Prior Year CPI
C. Numerator Number (A * (1+B))
4,212,000
D. Est. Current Year EAV
3.40%
E. Est. New Grow th
4,355,208.00
G. Current Year Est. Agg. Limiting Rate = (C / F)
F. Denominator Number (D - E)
2.6637
H. Est. Max Agg. Ext. = (G/100)*2004 EAV
170,000,000
6,500,000
163,500,000
4,528,290
2006 Tax Levy and Estimated 2006 Tax Rate
Proposed 2006
2006 Initial
Rate Reduction
Est. 2006 Limited
Est. 2006
Fund
Levy
Rates
%
Extension Rate
Tax Extension
Education
4,200,000
2.4706
2.2135
3,762,950
Tort Immunity
78,000
0.0459
0.0411
69,870
Special Education
36,000
0.0212
0.0190
32,300
Operations & Maintenance
360,000
0.2118
0.1898
322,660
Transportation
180,000
0.1059
0.0949
161,330
IMRF
55,200
0.0325
0.0291
49,470
Social Security
55,200
0.0325
0.0291
49,470
Working Cash
90,000
0.0529
0.0473
80,410
-
-
-
Life Safety
Aggregate Levy/Extension/Rate Total
0
5,054,400
2.9733
89.590%
2.6638
4,528,460
Aggregate % Increase
20.00%
Bond & Interest
656,000
0.3859
0.3859
656,030
5,710,400
3.3592
3.0497
5,184,490
Total Levy/Extension
Total % Increase
17.45%
7.51%
6.63%
Collection & Distribution
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Two mailings of tax bills
Taxes due one month after
billing date
Distribution : Cook County
March & Fall; Collar Counties
1/2 in June and 1/2 in
September; Downstate often
July and September
Delinquent tax list and send
notice of Application for
Judgment on Real Estate
Problem: Calculate Levy & PTELL
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Separate into small
groups of 3 or 4.
Review Levy, compute
limiting rate, and
individual fund
rates/extensions
Tax Levy Problem – Assumptions & Givens
Description
Amount
2004 Equalized Assessed Valuation
117,700,000
2005 Equalized Assessed Valuation
122,000,000
Estimated Current Year EAV
2006 Assumption ( A 6.56% Increase from 2005)
Estimated New Growth
2006 Assumption
December 2005 Actual CPI
Given
130,000,000
3,300,000
3.40%
Tax Levy Problem – Determine Levy Amount
2005
2005
2005
Maximum
Proposed 2006
Fund
Levy
Extension
Rates
Rates
Levy
Education
3,450,000
3,000,000
2.4590
Tort Immunity
74,750
65,000
0.0533
Special Education
25,300
22,000
0.0180
0.0200
26,400
Operations & Maintenance
345,000
300,000
0.2459
0.2500
360,000
Transportation
155,250
135,000
0.1107
0.1200
162,000
IMRF
46,000
40,000
0.0328
48,000
Social Security
46,000
40,000
0.0328
48,000
Working Cash
69,000
60,000
0.0492
-
-
-
Life Safety
Aggregate Extension
2.5000
3,600,000
78,000
0.0500
72,000
-
4,211,300
3,662,000
3.0017
4,394,400
Bond & Interest
395,000
395,000
0.3238
397,000
Total Extension
4,606,300
4,057,000
3.3255
4,791,400
Limiting Tax Rate Calculation
A. Prior Year Aggregate Extension
D. Est. Current Year EAV
B. Prior Year CPI
E. Est. New Grow th
C. Numerator Number (A * (1+B))
F. Denominator Number (D - E)
G. Current Year Est. Agg. Limiting Rate = (C / F)
H. Est. Max Agg. Ext. = (G/100)*2005 EAV
2006 Tax Levy and Estimated Tax Rate and
Extension
Proposed 2006
2006 Initial
Rate Reduction
Est. 2006 Limited
Est. 2006
Fund
Levy
Rates
%
Extension Rate
Tax Extension
Education
3,600,000
Tort Immunity
78,000
Special Education
26,400
Operations & Maintenance
360,000
Transportation
162,000
IMRF
48,000
Social Security
48,000
Working Cash
72,000
Life Safety
Aggregate Levy/Extension/Rate Total
0
4,394,400
Aggregate % Increase
20.00%
Bond & Interest
397,000
Total Levy/Extension
Total % Increase
4,791,400
18.10%
0.3054
0.3054
397,020
Referendums (old law – March 2006 and prior)
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Have your legal counsel and county clerk(s) check your referendum
question(s) as well as calculations in subsequent years.
If a district receives a tax rate increase, then a Rate Increase Factor is applied
to the numerator of the Limiting Rate Calculation. Rate increase can be
implemented over a maximum of five years
If you apply all your referendum increase the first year the Rate Increase
Factor formula would be: (Aggregate Rate for Prior Year + Rate Increase) /
Aggregate Rate for Prior Year
If you implement the rate increase over five years the Rate Increase Factor
Formula: (Aggregate Rate for Original Prior Year + Current Unused Rate) /
Aggregate Rate for Original Prior Year
Limiting rate = ((Aggregate Extension Base x (1+ CPI)) x Rate Increase
Factor) / (Equalized Assessed Valuation - New Property)
Referendums (new law – SB1682)
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Again, have your legal counsel and county clerk(s)
check your referendum question(s) as well as
calculations in subsequent years.
No more rate increase factors
No more individual fund rate increase questions
New ballot question asks for an increase in the total
limiting rate for 1 to 4 years
Even if you haven’t passed a referendum, it allows you
to extend up to the statutory maximum rates in
individual funds. No new money, just increased
flexibility between funds.
Assessment Appeals
Township Assessor
Board of Review
Property Tax Appeal
Board (PTAB)
Circuit Court (Complaint
for Administrative Review
Only)
Circuit Court
Time Frames for Filing Appeals
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Township Assessor – after receipt of proposed
assessment.
Board of Review – by township closing date.
PTAB – within 30 days of date of final decision
from Board of Review. (Mostly commercial and
industrial assessment appeals go beyond the Board
of Review)
Circuit Court – within 120 days of second
property tax installment due date
Typical Issues for Commercial/Industrial Appeals
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Fair cash value – this is determined by a proper
appraisal
Uniformity
Vacancy/Occupancy
Recent sales
Legal arguments (open space, conservation
easement, historic property, etc.)
Exempt status
Your Rights at the Board of Review (BOR)
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Right to notice if over $100,000 EAV Change
Right to Intervene (submit letter within 14 days)
May submit evidence and defend current assessment
Attend the hearings to 1) make sure the appellant knows that
the taxing bodies have knowledge of what is going on and
will be actively involved, 2) look at the evidence submitted
by the appellant (if presented) and the township assessor, 3)
to encourage the parties involved to come to a settlement.
All settlements at the BOR are pre-tax extension.
Your Rights at the Property Tax Appeal Board (PTAB)
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Right to notice - submit within 30 days
Only legal counsel can represent taxing bodies
The appeals process at PTAB may take up to two years to resolve. The
volume of PTAB Appeals State Wide: 1997 – 3,072; 1999 – 6,176; 2002 –
9,918
Manage your legal counsel- legal counsel will hire an independent
appraiser to review the appellant and the township’s appraisal. If appraiser
believes the appellant’s assessment is closer to the fair market value, do
nothing. If the appraiser believes the township assessor’s numbers are
closer to the fair market value then submit that to PTAB. If the appraiser
believes that both assessments are low, then get a full appraisal of the
property and submit that to PTAB and request an assessment increase.
Form consortiums with other taxing bodies to share the cost of challenging
the assessment appeals.
All settlements come out of current year’s tax collections
Your Rights at the Circuit Court
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You are not notified of cases presented to the court
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Some legal firms have begun monitoring the filings and can
notify you if a relevant case is filed.
The Illinois State’s attorney and the county assessor
represent the taxing bodies.
All settlements come out of current year’s tax collections
Keep an eye on this as this is a growing issue, especially in
Cook County
Other Local Revenues
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Foundations
Local Grants
Corporate Sponsorships
Finally, The End
Any Questions?